Investors got another look at what happens to a commodity-heavy stock market index when commodities suddenly fall out of favour:
The S&P/TSX composite index closed at 13,712.8, down 297.59 points or 2.1 per cent - a rough way to begin the first full week of the third quarter.Now, the index is down 0.9 per cent in 2008, putting it under water with the rest of the world's major stock market indexes for the first time since April. But you can't blame the economy on this turn. Instead, it appears to have more to do with a quick retreat from everything from corn to oil:
The Reuters/Jefferies CRB commodity index fell 2.8 per cent, its biggest dip since mid-March with 17 of the index's 19 commodities falling.To be fair, commodity producers weren't the only drags on the S&P/TSX commodity index. Nine of the 10 subindexes were down, as were 82 per cent of the 253 stocks in the broader index.
Financials were mixed, with Royal Bank of Canada rising 1.3 per cent and Canadian Imperial Bank of Commerce falling 2.8 per cent.But energy producers took the biggest hit, falling 2.8 per cent, after the price of crude oil tumbled to $141.37 (U.S.) a barrel in New York, down $3.92. The price briefly dipped below $140. EnCana Corp. fell 4.8 per cent and Canadian Natural Resources Ltd. fell 3.6 per cent.In the United States, the Dow Jones industrial average closed at 11,231.96, down 56.58 points, or 0.5 per cent.
The broader S&P 500 closed at 1252.31, down 10.59, or 0.8 per cent - its lowest close in nearly two years and 20 per cent below its October high, the definition of a bear market.Although energy stocks also took a hit, tumbling 2.3 per cent, the biggest drag were the financials, which fell 3.2 per cent.
Freddie Mac and Fannie Mae fell 17.9 per cent and 16.2 per cent, respectively, on a report from Lehman Brothers that the two troubled mortgage finance companies may have to raise a combined $75-billion - a prospect that soured views on the rest of the sector. Citigroup Inc. fell 2.5 per cent and Bank of America Corp. fell 3.9 per cent.Copyright 2001 The Globe and Mail
Monday, July 7, 2008
Energy takes a hit
Oil whacked
At noon: Oil whacked
Monday, July 07, 2008
Sorry, Canada, but you can't blame investors around the world for celebrating the tumbling price of oil on Monday, which sent U.S. indexes slightly higher at midday but has put Canada's benchmark index into a tizzy.
Oil fell to – can you believe it? – the low-low price of $139.57 (U.S.) a barrel in New York, down $5.72 a barrel,[amp]nbsp;possibly because of reduced fears that Iran is about to join the nuclear club, and possibly because investors have the impression that the G8 annual summit will somehow put the global economy back on track. Whatever the cause, oil is still not cheap, but it's moving in the right direction to remove some of the uncertainty surrounding inflation and corporate earnings.
The Dow Jones industrial average rose 63 points, or 0.6 per cent, to 11,351. The broader S[amp]amp;P 500 rose 4 points, or 0.3 per cent, to 1267. Both indexes were heading down again, though. Technology stocks were the clear favourites, after Microsoft Corp. said it would consider taking another run at Yahoo Inc. Yahoo shares rose 11.7 per cent, Apple Inc. rose 2.3 per cent and International Business Machines Corp. rose 2 per cent.
In Canada, the commodity-heavy S[amp]amp;P/TSX composite index fell 117 points, or 0.8 per cent, to 13,893. Energy stocks were by far the biggest drag, with the sub-index tumbling 2.1 per cent. In particular, Canadian Natural Resources Ltd. fell 2.9 per cent, EnCana Corp. fell 2.4 per cent and Canadian Oil Sands Trust fell 4.6 per cent.
However, Potash Corp. of Saskatchewan Inc. provided some relief, rising 1 per cent and contributing 18 points to the benchmark index.
© Copyright The Globe and Mail
Thursday, July 3, 2008
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WEBCASTJune 19, 2007
Oil soars to record above $145
Oil soars to record above $145
PABLO GORONDI
Thursday, July 03, 2008
KUALA LUMPUR — Oil prices neared $146 (U.S.) a barrel Thursday for the first time ever on reports of declining U.S. stockpiles and the threat of conflict with Iran.
Comments by Saudi Arabia's oil minister suggesting his country had no immediate plans to boost production also lifted prices.
Expectations that the European Central Bank will raise interest rates later Thursday could further weaken the U.S. dollar and drive oil prices even higher, as investors turn to commodities as a hedge against a falling greenback, traders said.
By midday in Europe, light, sweet crude for August delivery rose $2.28 to a record $145.85 a barrel in electronic trading on the New York Mercantile Exchange.
On Wednesday, the contract set a new closing record for floor trade at $143.57 — a full $2.60 above the previous close.
The latest spike means a barrel of crude has gone up by more than 50 per cent since the end of last year, when oil was going for $96 a barrel.
In London, Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange before retreating to $146.07, up $1.81.
“Even though the rise of European interest rates has been priced into oil, an official announcement by the ECB will still add momentum to oil prices,” said Victor Shum, an analyst with Purvin & Gertz in Singapore.
The push above $145 a barrel was seen as a last technical barrier to prices hitting $150, in what analyst Olivier Jakob of Petromatrix in Switzerland called “the Morgan Stanley self fulfilling prophecy.”
In early June, a prediction by Morgan Stanley analyst Ole Slorer that oil prices could reach $150 by the July 4 weekend caused the Nymex contract to jump nearly $11 in a single day.
Speaking Thursday in Madrid, Saudi Arabia's oil minister, Ali Naimi, left the door open for increased output, but said the kingdom's oil customers were satisfied and that no production growth was planned for now.
The Energy Department's Energy Information Administration said Wednesday crude oil supplies fell by 2 million barrels last week, or about 800,000 barrels more than analysts surveyed by the energy research firm Platts had predicted.
However, the report offered a mixed picture of energy use by the world's thirstiest oil consumer. Gasoline supplies unexpectedly grew by a considerable amount, and demand continued to slide — suggesting record fuel prices are prompting a shift in American driving habits.
Ongoing rhetoric about possible attacks on Iran, the world's fourth-largest oil producer and OPEC's second-largest exporter, also left the market jittery.
Traders are worried Tehran could try to halt shipments and seize control of the strategically important Strait of Hormuz if attacked by Israel or the United States. About 40 per cent of the world's tanker traffic passes through the Middle Eastern choke-point.
Iran's foreign minister did not rule the possibility that Iran could try to restrict oil traffic in the strait if the country was attacked.
“In Iran we must defend our national security, our country and our revolutionary system and we will continue to do so,” Foreign Minister Manouchehr Mottaki said in an interview with The Associated Press in New York.
Mr. Mottaki said he does not believe Israel or the United States will attack, however, calling the prospect of another war in the Middle East “craziness.”
A senior U.S. military commander vowed to ensure that the strait remains open.
“We will not allow Iran to close it,” said Vice Admiral Kevin Cosgriff, commander of the 5th Fleet based in Bahrain, after talks with naval commanders of Persian Gulf countries in the United Arab Emirates.
The saber-rattling has left energy traders on edge as they try to ascertain the likelihood of a Middle East flare-up and the effect it could have on the world's already tight supply of oil.
In other Nymex trading, heating oil futures added 5.15 cents to $4.1230 a gallon, while gasoline futures rose 2.56 cents to $3.5750 a gallon. Natural gas futures gained 13.7 cents to $13.526 per 1,000 cubic feet.
© Copyright The Globe and Mail
